Abercrombie & Fitch
When I last took a look at Abercrombie back in August, it looked as though the company was eager to get out of the summer and back to school. The change of seasons has paid off indeed: Just check out the chart. The reasons, meanwhile, are really quite encouraging. Revenues and same-store sales at the core Abercrombie & Fitch store line were up substantially, with "comps" rising 4% during the quarter; at fast-growing Hollister, meanwhile, same-store sales jumped 19%.
And net income rose 6% year-over-year for the 12-month period -- 18% if you take out the impact of the multimillion-dollar charges the company had to pay to settle anti-diversity lawsuits -- as gross margins widened. Share buybacks, meanwhile, boosted EPS growth.
The Hollister news is perhaps what's most important to long-term Abercrombie investors. The beach-themed chain is a sign that the company, which has always planned on developing new store concepts to juice growth rather than painting the landscape with its eponymous stores, can indeed create new chains that justify management's investment, grow quickly, resonate with shoppers, and deliver profits.
The latest one, Ruehl, is up-and-coming, and the company is using it to target a slightly more up-market consumer -- something not unlike what Gap
It's a sensible move: Young professionals need clothes that can take them from Monday morning to Saturday night, and Abercrombie seems well-positioned to communicate with those shoppers -- although, for the moment, relatively few of its offerings would make it past casual Friday. If Abercrombie can come close to recreating Gap's success with Banana, its investors should be more than happy with the results.
Fool contributor Dave Marino-Nachison doesn't own Gap or Abercrombie shares.